How Your Roof Impacts Your Home Insurance Policy

All forms of insurance are designed to enhance your peace of mind and protect you or your loved ones from financial losses. Health care insurance helps cover your medical costs, liability insurance helps protect your assets if you are found responsible for another party’s losses, and homeowners insurance helps pay for the repair or replacement of your home and its contents. Surprisingly, studies have shown that many consumers are more familiar with their automobile insurance policies than their homeowner insurance policies, especially the coverage for their roofs. Because Texas roofing can be susceptible to damage caused by severe weather, it is wise to familiarize yourself with the details of your policy long before you need to file a claim. Understanding your coverage can also be beneficial when it is time to renew your policy or select a new insurance company.

How Your Roof Impacts Your Home Insurance Policy

What Is an Insurance Deductible?

Your deductible is the amount of your loss that you must pay out of your own pocket. Your insurance company will not make any payment for a loss that is less than your deductible. To illustrate, suppose your policy shows a deductible of $5,000 for weather-related roof damage, but your roofer can repair the damage for $2,000. Your insurance company would not pay a penny toward the repairs. Alternatively, suppose your roof requires an insurance restoration costing $30,000. Assuming the same deductible amount, your insurance company would pay no more than $25,000, leaving you on the hook for the remaining $5,000.

What Is the Difference Between Replacement Cost Value and Actual Cash Value?

Coverage based on the replacement cost value, often abbreviated as RCV, means that your insurance company will pay the prevailing retail cost of a roof replacement. If your coverage is based on the actual cash value, commonly called ACV, your insurance company will pay the depreciated value of your roof. Regardless of whether you have RCV or ACV coverage, you will still need to pay your deductible. However, if you have an older roof, ACV coverage can leave you responsible for a substantially greater portion of the expense. For example, if you had a new roof with a life expectancy of 20 years installed 10 years ago, your insurance company will apply 10 years of depreciation. Suppose the depreciation schedule calls for an annual depreciation of $800. Your insurance company will deduct $8,000 from the cost to repair or replace your roof for depreciation. Therefore, assuming your deductible is $5,000, if your repair or replacement costs total $20,000, your insurance company will only pay $7,000.

What Are Some Important Factors to Consider When Renewing a Policy?

People have different needs and resources, so there is no policy that is just right for everyone. It is important to remember that insurance companies are businesses, so the greater their risks, the more they will charge for their services.

• As a rule, premiums decrease when policyholders assume more risk. For example, if all other factors are identical, a policy with a deductible of $5,000 will cost less than the same policy with a deductible of $1,000. Similarly, homeowners typically pay less for ACV coverage than for RCV coverage.
• New roofing options can often reduce the cost of your policy. Because metal roofs are less likely to be damaged by fire and severe weather, many insurance companies offer significant discounts for homes protected by a properly installed metal roof. However, regardless of the type of roof, insurance premiums are typically less if the roof is relatively new than if it is reaching the end of its expected life.
• There are times when an insurance company decides that its risks are simply too great to write or renew a policy. For example, if your roof has incurred damage that you never repaired, you might have to repair the damage before you can obtain coverage. Damaged or missing flashing can also be problematic. If there are large trees with heavy limbs hanging over your roof, your insurance company might have an issue with them, especially if the trees are unhealthy or damaged. If you are concerned about such matters, you might want to contact a reputable roof company to inspect your roof before your insurance company conducts its own inspection.